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4/7/17

Dedicated to reader M. There's been a lack of Spanish language music at The Friday OT in recent times and that's not fair, so to help fill the hole here's one of the most played rock/pop tracks of all time down this way (and great lyrics).

Spend more than a week on the continent and time in taxis, it'd be difficult not to have heard this song. Youtube here.

4/6/17

It's one of the hottest zinc juniors out there and your humble scribe lunches with its CEO this week. Yes, we're talking Tinka Resources (TK.v) with Graham Carman. Then it's another one of the hottest juniors out there, but this time copper and your humble scribe lunches
with its CEO this week. Yes, we're talking Regulus Resources (REG.v) with John Black. And if that weren't enough, a brand new base metals pick coming your way as well. All that, plus the usual guff and nonsense, in IKN412 out Sunday evening.

...that's getting better and wonderful under President Macri, do yourself a favour and watch what goes on there tomorrow, Thursday April 6th. You'll get a glimpse of how bad it's got in the first year and a bit and how badly it's going to go for Macri on October 22nd.

The selling witnessed in Continental Gold (CNL.to) must have hurt all those CNL insiders who bought at higher prices recently. But the response is bizarre and is straight out of the little leagues, CNL's NR today isn't much more than a petulant "It's Not Fair!" piece of foot stompingabout what looks like one fund liquidating a medium-sized position as the reality of the situation finally sinks in, that there is no buyout offer coming for this stock and the price is destined for a long period of flatline.

It doesn't help that the man at the head of CNL, Ari Sussman, has the baggage of being in charge of companies that suddenly come under selling pressure on no news, with retail finding out the reasons a long time afterwards. And that Sussman quietly sold millions of dollars of his shares at that previous gig at higher prices. History rhymes, so maybe retail are right to be nervous.

As I put together my thoughts on
the deal done by Goldcorp (GG) this week to buy half of Cerro Casale and all of
Caspiche (see ‘Producer basket’ below) I got to thinking about the way these
tier one stocks are being run at the moment. The big turnaround story of the
sector is, of course, Barrick (ABX), which has managed to pull back from the precipice
since ex-GS-orthodox-capitalist Thornton took over from
gold-prospector-hit-it-big Munk and the decision was made to run ABX like a
normal company instead of applying the crazy pretzel logic that seems to prevail
in the sector.

The difference at ABX has been its
new, hard-nosed attitude towards the balance sheet and particularly to its debt
position. In the 2009 to 2011 period Munk added nearly U$12Bn to the company’s
liabilities, most of that as straight financial debt. Which is all well and
good if the gold bull goes on forever, but what we now know is that the party
came to a shuddering halt in 2013 and left ABX staring down the barrel of real
financial problems. And that’s what has made ABX under Thornton the big
turnaround success; he’s sold fixed assets, hacked down the debt and plans to
continue to do so in the next two financial years (another U$2.4Bn or so to
come off the debt in order to get it down to U$5Bn, he says).

What with the Garofalo decision last
week to follow the samo samo route of mining companies and buy mediocre assets
with real money, I got to thinking about the two companies and compared their
balance sheets over the important recent period. There are plenty of interesting
comparisons that show up and we could take a lot of space to chew them over,
but the crux is in two datasets comparing the crisis year end of 2013 to the
end-of-tunnel year end of 2016:

In the period end 2013 to end 2016, Goldcorp increased
its financial debt by U$1.0Bn

In the period end 2013 to end 2016, Barrick reduced
its financial debt by U$5.1Bn

At end 2013 Goldcorp had a market cap of U$17.1Bn. Today
its market cap is U$14.6Bn

At end 2013 Barrick had a market cap of U$18.1Bn.
Today its market cap is U$19.0Bn

In a nutshell, the decision by
Thornton to treat ABX as a normal company that needs to show financial
discipline and balance sheet strength has seen the market cap of the company
under his charge increase by close to a billion from the start of the slump to
the end of the tunnel. However the collective decisions of Telfer and Garofalo,
prizing gold ounces and project collection over basic financial well-being have
seen GG’s market cap (aka “the sliver of hope that lies between assets and
liabilities”) drop by over U$2.5Bn.

The decision last week by GG to buy
into Cerro Casale, plus the stated intention of ABX to keep reducing its
financial debt by selling fixed assets (and apparently the next deal is close
to hand) show that the trends we saw in both companies in 2013 to 2016 are only
set to continue. In other words, one of these companies is doing it the
old-school way, betting on projects and hoping gold prices makes it look smart
later. Meanwhile, the other company is being run well.

52m of 10% Zn and 15m of 20% should make for interesting trading action today.

Yes, that's an understatement. How did you know?

UPDATE: I'm receiving mails so just to clear this up, once and for all. The IKN Weekly reco'd Tinka Resources (TK.v) in April 2016 when it was a 14.5c stock.

I didn't get any at that price personally because it popped hard the next day, but did start buying then and eventually built a full position at a cost average of 19.5c. We then had to wait all 2016 for something to happen, it was pretty frustrating to see it flatline while other Zn plays moved up. But patience pays its own dividends, or as Jesse Livermore wrote, "Be right, sit tight".

The stock is now a totally different proposition. It has mojo and volume, plus guaranteed newsflow in 2017 on a star-in-making property, so even though I'm a mile up on the position there will be no selling here, not even a partial sale to lock in profits. Plenty more to come from Tinka Resources, be clear.

4/2/17

Around 8pm local time (in about one hour) we should get the fast count result from the Ecuador election people, but even then you get the feeling this result is going to be contested by whoever loses and the story will run and run. Buckle up.

UPDATE: Lasso's people can (and will) cry fraud for all they want, but Moreno's got this one. 51/49. Candace and Terry have dodged a bullet and must be happy.

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